China Energy Corp (OTC BB:CHGY)

On December 19, 2011, Alex Gong departed from his position as Chief Financial Officer of China Energy Corp. (the “Company”). Mr. Gong’s departure was not the result of a disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

News from the GeoTeam.

(Please note that any protected blog posts and pages need the password GEOTEAM for access It is case sensitive)

Shengkai Innovations (NASDAQ:VALV) ($1.60)

Please see our thoughts on VALV's decision to change auditors.

China Ceramics Co (NASDAQ:CCCL) ($4.05)

Although many facets of the the OTGDD on CCCL were positive, we are still digging into the CCCL story, especially with regards to its SAIC filings and a related party transaction issue. The original SAIC filings that we pulled did not match the SEC filings. However, the SAIC filings that we pulled at a later date were on par with the SEC filings. Thank you for your patience as we develop this story.

We are neither long nor short shares of CCCL.

China Energy Corp (OTC BB:CHGY) ($0.44)

China Energy Corp has finally achieved a positive net working capital position for the first time since going public in late January 2007, reversing the trend of 4 straight years and 17 straight quarters of a negative net working capital position. However, a good deal of this reversal was generated from repayment of a related party note receivable that had been on the balance sheet for several quarters.

"As of May 31, 2011 we had a working capital surplus of $6,310,207, compared with a working capital deficit of $21,723,598 as of November 30, 2010. The improvement of liquidity was mainly due to (i) the full repayment of notes receivable amounting to $14.7 million which was lent for strategic purposes to related parties affiliated to the Company through family members of the Chairman; (ii) net income from the operating business in the first half of 2011; and (iii) proceeds from finance obligation amounting to $9.3 million. We anticipate that the combination of our sales and collection of accounts receivable with our longer accounts payable cycle, customer deposits and proceeds from bank and shareholder loans will generate sufficient cash flow to sustain our working capital needs." (http://geoinvesting.com/companies/chgy_china_energy_corp/research)

Investors may also want to know that CHGY recently changed its corporate structure to a Variable Interest Entity (VIE) from a Foreign Invested Enterprise (FIE).

http://geoinvesting.com/companies/chgy_china_energy_corp/research/investor_alert/0026085

We have no position in CHGY

Other Developments

Please visit the following links:

Recent changes in short positions (JVA, TRIT, CMCI, GCHT) - http://blog.geoinvesting.com/?page_id=1256

Long positions (new) - http://blog.geoinvesting.com/?page_id=2489

China Co Conference calls and beats/misses (new) - http://blog.geoinvesting.com/?page_id=2443

Also make sure to subscribe to message boards to receive timely information on U.S. and ChinaHybrid companies. The following had been put out on TRIT:

http://geoinvesting.com/forums/yaf_postsm11526_Covered-TRIT-short-position-Price-now-fully.aspx#singleMsg.

We are also performing on-the-ground due diligence on a couple of companies for which we found positive initial findings, as well as on a few companies where the initial due diligence has been negative. Stay tuned!!!

Its obviously been tough on the U.S. front for many of the micro companies we follow. Overall, the financial results have been mostly positive. GeoSpecial CMT came through with the best quarter thus far. http://geoinvesting.com/companies/cmt_core_molding_technologies/research/comments_business_outlook/0031718.

Management comments were particularly strong, going out on the limb to say that business looks good all the way to 2013. Once this market turns around, provided we don't enter a severe recession, we think this stock could easily double to $16.00. We tepidly bought some shares, but may be more aggressive as market sentiment improves

GeoSpecial VSR has seen shares recover today after it announced a potentially significant contract award this am. http://geoinvesting.com/companies/vsr_versar/alerts We are eagerly awaiting the release of the company's 2011 second quarter release to see if the company will set a new EPS barometer.

Sifco Industries (NYSE AMEX:SIF) ($18.14) reported dynamite quarterly numbers this morning. We will nibble at shares and look to code as a GeoSpecial if our review the 10Q is positive. A recently completed acquisition could propel EPS for the next few quarters.

Usa Mobility (NASDAQ:USMO) ($14.68) and Multi Color Corp (NASDAQ:LABL) ($21.03) are also beginning to pique our curiosity.

Please be aware that shares of CMT, VSR and SIF are thinly traded.

We will be sifting through the recent market carnage to identify companies whose shares were punished despite reporting strong second quarter financial results. There are plenty.

**All prices are as of business close August 10, 2011.

Sincerely,

The GeoTeam

As of May 31, 2011 we had a working capital surplus of $6,310,207, compared with a working capital deficit of $21,723,598 as of November 30, 2010. The improvement of liquidity was mainly due to (i) the full repayment of notes receivable amounting to $14.7 million which was lent for strategic purposes to related parties affiliated to the Company through family members of the Chairman; (ii) net income from the operating business in the first half of 2011; and (iii) proceeds from finance obligation amounting to $9.3 million.

We anticipate that the combination of our sales and collection of accounts receivables with our longer accounts payable cycle, customer deposits and proceeds from bank and shareholder loans will generate sufficient cash flow to sustain our working capital needs.

Substantial portions of the cost of construction of the thermoelectric plant and of the costs of expansion projects at Heat Power and the coal mine were provided by stockholder loans. Balances are detailed below:

February 28, 2011												November 30, 2010
		Amount				Interest				Total				Amount				Interest				Total
Ordos City YiYuan Investment Co., Ltd. *		$	1,361,983				424,773				1,786,756			$	1,342,433				400,855				1,743,288
Hangzhou Dayuan Group, Ltd. *			3,903,337				1,326,045				5,229,382				3,847,308				1,255,937				5,103,245
Inner Mongolia Duoyida Mining Co. Ltd. *			1,460,898				453,336				1,914,234				1,439,928				485,855				1,925,783
Total		$	6,726,218				2,204,154				8,930,372			$	6,629,669				2,142,647				8,772, 316

On October 21, 2010 the Board of Directors also approved a one for three reverse stock split of the Company’s common stock, which the Board in its discretion, could abandon. The Board of Directors subsequently determined not to pursue the one for three stock split at this time.